Correlation Between Guangdong Investment and Compania Cervecerias
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Compania Cervecerias at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Guangdong Investment and Compania Cervecerias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Guangdong Investment and Compania Cervecerias and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Guangdong Investment with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Compania Cervecerias.
Diversification Opportunities for Guangdong Investment and Compania Cervecerias
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guangdong and Compania is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Guangdong Investment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Guangdong Investment Limited are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Compania Cervecerias go up and down completely randomly.
Pair Corralation between Guangdong Investment and Compania Cervecerias
Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the Compania Cervecerias. In addition to that, Guangdong Investment is 1.32 times more volatile than Compania Cervecerias Unidas. It trades about -0.12 of its total potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.05 per unit of volatility. If you would invest 1,123 in Compania Cervecerias Unidas on September 3, 2024 and sell it today you would earn a total of 13.00 from holding Compania Cervecerias Unidas or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Compania Cervecerias Unidas
Performance |
| Timeline |
| Guangdong Investment |
| Compania Cervecerias |
Guangdong Investment and Compania Cervecerias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Compania Cervecerias
The main advantage of trading using opposite Guangdong Investment and Compania Cervecerias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Compania Cervecerias can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Compania Cervecerias will offset losses from the drop in Compania Cervecerias' long position.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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